This Year Will Be A Big Test
The Chicago Tribune reports from Illinois. “The Chicago metropolitan region ‘isn’t as bad as Florida and California, ground zero in the housing recession, but we have the same problems,’ said economist Diane Swonk. The ills ailing the new-home market here include too much speculative building and soaring mortgage default and foreclosure rates, she said. Especially hard-hit are Chicago’s inner-city neighborhoods and growing communities like Joliet, Swonk said.”
“‘Unfortunately, about half of the people having problems with subprime mortgage loans could have qualified for prime loans,’ she said. ‘This reflects greed all around.’”
“‘I worry about the second shoe falling on the downtown condo market,’ Swonk added. ‘Chicago came late to this housing boom so there still are a lot of units in the pipeline due for delivery in the next 18 months. This year will be a big test.’”
“‘This is the first housing downturn that is self-inflicted, although exacerbated by financial institutions offering exotic housing loans,’ said Tracy Cross, president of a Schaumburg-based research and consulting firm.”
“As the housing market started to slow down two years ago ‘builders didn’t recognize the bell had tolled and kept on building,’ Cross said.”
“Prices climbed so high they no longer could be offset by low interest rates or exotic mortgages. ‘High home prices were a great culprit in the overall equation,’ Cross said.”
“At the same time, homeowners trying to sell their houses hesitated to lower asking prices. ‘Sellers held on too long, causing a logjam in the market,’ Cross said.”
“Indeed, new-home sales in the region fell 37.5 percent last year compared with 2006, with a 32.1 percent drop in Chicago and 39.2 percent in the suburbs, he said. Regional home sale prices, including builder incentives, fell 3 to 5 percent, Cross estimated.”
“Cherya Jenkins says she has been snagged by a Catch-22 of the mortgage-market mess: She wants to refinance the loans on her West Side three-flat but hasn’t been able to — because she tried to sell the building last year.”
“‘People who are facing rising payments in the future are being told to try and sell first,’ said Jenkins of Chicago. ‘But if they can’t sell the property, they have essentially ruined their chance to refinance it.’”
“‘When your home is on the market or has been on the market, generally, you’re not going to be allowed to get a new mortgage,’ said Keith Gumbinger, VP of a mortgage-industry publisher.”
“At least for a certain period of time. That’s because, he and others say, the mortgage business tends to presume that if you refinance your home after a failed attempt to sell, you still might try to sell it soon, paying off the loan and thus erasing any profit the lender might have made.”
“It’s not a new policy but, in the heat of the housing boom, it didn’t come into play very often.”
“Times have changed. The inventory of homes on the market in the Chicago area swelled in November to about 111,000, according to data from the MLS of Northern Illinois. In November 2005, when the market was beginning to cool, there were 73,000.”
“‘I’ve seen it twice in the last few weeks,’ said Dan Green, a mortgage broker in Chicago. One client is now waiting through the 90-day post-listing period his lender stipulated; the other managed to get a loan approved by a lender that had no days-off-market policies.”
“And that client is lucky he acted when he did, Green said. ‘I’m pretty sure that had we submitted the loan now, it wouldn’t have gone’ because the lender’s days-off-market policies have changed, he said.”
“‘So far, the people looking for these refi’s are people in trouble — speculators, investors and marginal players who also need to take cash out [of their new loans],’ said Ken Perlmutter, president of Perl Mortgage in Chicago. ‘People in those situations are going to have a hard time.’”
“Jenkins said that the irony in her situation is that she and her husband intend to hang on to the Austin three-flat for several years, though it was on the market for the better part of 2007. In October, they gave up on selling and decided to keep the building to recoup the money they had spent on repairs, she said.”
“But in November, she said, they learned that their payments would go up by $175 a month in February, to nearly $2,400, to cover a shortfall in her property-tax escrow account.”
“Her loan representative said that because the appraisal revealed that the house had been for sale in 2007, the couple would have to wait 12 months from the date the listing ended.”
“Jenkins began calling other banks, prefacing each conversation with the news her three-flat had been on the market in 2007. Numerous lenders told her the building would have to be delisted for three to 12 months to be considered for a refinance.”
“‘The issue is not a matter of bank policy but one of what criteria investors on the secondary market set forth when agreeing to purchase loans from lenders,’ said Terri M. Wilson, a VP for National City Bank media relations.”
“Chad and Jeanine Smith bought a townhouse in northwest suburban Lakemoor in December 2002, the line between profit and breaking even, or losing money, is a fine one.”
“‘I don’t want to have to take a loss, though I’m afraid that might have to happen,’ he said.”
“The couple began trying to sell their home in April 2007, with several potential buyers visiting over the summer. But they’ve had no one look at the three-bedroom unit in several months. They’ve lowered their price to $203,900 from $207,000 and are thinking about asking $199,000, he said.”
“‘I’d be happy with $199,000,’ Chad Smith said. ‘That would represent a profit, but not much.’”
“The Illinois group…said that for all of 2007, home sales in the Chicago area totaled 92,656, down 20.5 percent from 116,527 in 2006. In 2005, the year the market peaked, 133,305 homes were sold.”
“Analysts said the reduction of inventory of homes for sale was slightly encouraging, but the figure may reflect sizable numbers of people who took their homes off the market during the holidays and who may soon relist them.”
“Then there’s the rising flow of homes in foreclosure. Those properties are expected to land on the market in 2008 in record numbers.”
The Flint Journal from Michigan. “Pagi Pillen took on a part-time job. Mark Calvert got out of the industry altogether. The slumping local real estate sales market, where foreclosures and listings are high and sales prices have fallen, has taken its toll on real estate agents.”
“Membership numbers from the Flint Area Association of Realtors has fallen by about 300 in the past two years to about 1,000 today, said Mark Dickens, the group’s CEO.”
“Calvert, of Flushing Township said he got out of the business about a year ago, after his income fell by 35 percent to 40 percent. He sold real estate for 10 years.”
“Now, he’s going back to school. ‘It just had to be done,’ he said. ‘We can sugarcoat the economic realities all we want to. In my particular case, I just felt it was time for me to be retrained.’”
“Both Calvert and Pillen said real estate agents who do foreclosure and bank-owned property work are surviving, but those dealing in traditional sales feel the pinch.”
“‘I do have another job. I don’t have a choice,’ said Pillen of Byron. ‘I’m a single mom.’”
“The Garrow real estate firm once was one of Genesee County’s largest real estate companies, with eight locations and about 170 agents in 2006, when the company then known as Garrow GMAC Real Estate planned to expand into Oakland County, according to Flint Journal files.”
“Now called Garrow & Associates Inc., the company lists just three offices - in Vienna Township, Grand Blanc Township and Davison - and about 50 agents.”
“Some are also changing their specialty to reflect the market. ‘We have a lot of agents who are doing bank repos,’ said broker/owner Imad Isaac of the 40-agent RE/MAX Select in Mundy Township.”
“As much as 60 percent of the firm’s business is foreclosures or bank repossessions, said Issac, who serves on the Flint Area Association of Realtors’ board of directors. Isaac estimates that up to 40 percent of the more than 4,700 sales last year by Flint association members were foreclosures.”
“‘The problem is, it’s very difficult to sell a regular house because they’re competing against a bank repo,’ he said.”
The Pioneer Press from Minnesota. “Hard times for homebuilders spelled deals this past weekend at the Minneapolis Convention Center, where local contractors sold 180 of 216 newly built homes they put on the auction block.”
“The sales included nearly all of the 62 homes in a batch that had no set minimum price and simply went to the last and highest bidder, an unusual sight for a housing market known for stability.”
“Winning bids ranged from 20 percent to 75 percent off the original listing prices, said Brent Berry, president of Minneapolis-based Norman Mitchel International, which co-managed the auction. ‘There were townhomes that went for $58,000,’ Berry said. ‘I couldn’t believe it.’”
“Some went to first-time homebuyers such as Marie and Timothy Philippi. They successfully bid on a three-bedroom, three-bath unit with a view of the St. Paul skyline. Philippi said she didn’t want to disclose the price, but said they got it for ’substantially lower’ than its original $266,000 price tag.”
“‘I think it was an awesome deal,’ she said. ‘It’s still in the Sheetrock phase, so we get to pick out colors and cabinets and everything.’”
“Bill Johnson, head of the state’s No. 9 builder based on 2006 sales, said his company sold 18 homes in the auction, many to young couples such as the Philippis. He sold the homes at a loss, he said, with discounts around 40 percent.”
“‘Do we love it? No, but it’s OK,’ said Johnson. ‘Empty specs and empty houses do no one any good.’”
“Berry said he’s booking another auction with M.W. Johnson for March 15 in Cape Coral, Fla. That auction may involve 50 single-family homes, as well as some land.”
“Since builders are still calling him, Berry said he’s hoping to hold another auction in the Twin Cities later this spring.”
The CT isn’t doing a great job covering this market, IMO. They obviously have more than a years supply, but repeat the UHS numbers of 200 days on the MLS. And prices are supposedly flat, but a 2002 purchase is underwater?
That’s becuase as far as real estate is concerned, if the CT was a pimp - it would be Huggy Bear.
Should soon be time for their annual “Spring Festival of Homes”!
I was thinking more like Bishop Don “Magic” Juan but Huggy Bear works too.
Don King, no?
You think holding on to a house is hard? Try selling the Chicago Cubs.
Well, there’s no shortage of buyers for the Cubs. But they are trying to sell the Cubs “house” to the state!
The year of the purchase doesn’t matter. Comps are messed up between forclosures and people dumping their own place to get out. So yes, a 2002 purchase could easily be “underwater…”
“Prices climbed so high they no longer could be offset by low interest rates or exotic mortgages. ‘High home prices were a great culprit in the overall equation,’ Cross said.”
It’s amazing that it took the “experts” this long to realize something that average folk knew 3 & 4 years ago.
You can’t even get those kinds of mortgages anymore either. Prices are crashing as fast as they went up
Prices were the effect not the cause. The true cause was easy credit. Now that is gone and prices are falling and must and will fall further.
“Joe Paris, an appraiser and real estate broker and owner of the Real Estate Training Academy in Burton, said he is optimistic about the market rebounding.”
Paris, who launched the school in 2006, has one class now that has just five people, but he expects class sizes to increase in the spring.
“People need to understand that real estate is a cyclical thing,” he said. “There are a lot of people making a lot of money right now in real estate.”
Around Flint??? Nice spin, buddy. No way can that area support anywhere near 1,000 agents.
I saw “Roger and Me” 20 years ago and knew right then and there, that Michigan was doomed to failure.
Pets or food.
Pets FOR food!
There’s a huge amount of urban exploration sites ( people taking photos of abandoned hotels, office buildings, factories, etc) that are heavily concentrated in Michigan, most notably in Detroit. The place looks like a bombed-out city. I’ve never been there, so I can’t speak for myself.
The best site is called: ” Forgotten Detroit” Creepy stuff.
Many parts of the rustbelt could double as Hamburg, Germany… circa 1946.
The difference being, that 20 years later, Hamburg was largely rebuilt.
Here is a link that is relatively new from Detroit. We all know that Detroit is crumbling but these pictures somehow to me are indicative of more then just about Detroit. Not sure I share the blogger’s assumptions but nevertheless the pictures speak for themselves…
This is a building where our deeply-troubled public school system once stored its supplies, and then one day apparently walked away from it all, allowing everything to go to waste. The interior has been ravaged by fires and the supplies that haven’t burned have been subjected to 20 years of Michigan weather.
http://tinyurl.com/35c4xj
The link isn’t working, but you can backtrack to it by going to the blog’s home, or here (scroll down the page).
Amazing, humbling photos.
I’ve explored Detroit. It’s actually kinda fun. I didn’t get out of my car and never felt unsafe. There aren’t a whole lot of people around in the first place, and no one cares if you blow through red lights or stop signs.
I never ventured too far from Woodward Ave, so maybe other parts of town are worse. But there is a lot of very nice housing stock still standing, slowly secaying but still being lived in.
Flint?!? Flint, MI?
Isn’t that like the poster-child for economic despair?
it’s different here. I mean really could flint have had a housing bubble?
It’s not just Flint or Detroit. I recently visited my hometown in upper Michigan - a small “affluent” town and I swear there was a For Sale sign on just about every single street. It was shocking and a little bit scary.
I’m startled there are as many as 1,000 people in Flint trying to sell houses for a living in the first place.
Yes, real estate is a cyclical thing. They cycles last for 5-10 years. Joe can expect a nice rebound in 2010 or later.
My prediction is for the “later”.
Observation from NW side of Chicago:
A coworker has to do an estate sale and asked me about an agent as he has no time between family and work to do FSBO. So, I put him in contact with an agent that I worked with back in 2001. This agent works in the areas along Harlem Avenue from roughly Elmwood Park (suburb) up to Edison Park (Chicago proper).
According to this agent, yes, the inventory is heavy - but especially troubling are the soaring numbers of REOs being dumped on the market. This agent has worked these areas for more than twenty years, and I grew up there. So, this news is siginifcant to that area.
The northwest side of the city is home to many a cop, fireman, and other civil servant. It is also home to a huge number of seniors - many of whom should have no mortgage. This is hardly the kind of area that one would look first to find Chicago REOs - this is not the “inner city” by any means.
Bottom line: “inner city”, like “subprime” are just MSM cop outs - this Hydra has heads poking through just about everywhere.
Oh yeah, posted this photo late the other night:
http://tinyurl.com/37sk2n
When viewing it, please consider these points:
1. This was a decently constructed house - not Tyvek wrapped plywood
2. This house was built in a neighborhood with full amenities, utilities, and transport - not in a far flung exurb
And still this happened, and still the NAR, even in the face of all that is happening, is telling people to sign away decades of their labor and life on a “sure thing”.
Dang.
Do you know where that building is, more or less?
Best guess would be due south of the Loop - in the infamous “Black Belt”. Over the years I’ve seen some harrowing historical photos from that area. Outrageous stuff - buildings sub-divided into apartments using cardboard for instance.
Today what remains of the south side’s historical houses fetch quite buck. It is perplexing why some houses suffered the fate of the one in the picture - while others go for an easy M today. There’s a lesson there - for this bust.
This is no different than NYC.
People forget that Harlem was the crown jewel of Manhattan real estate. Just take a walk there. The dilapitated brownstones will make you weep.
The South Side of Chicago is similar. For every Kenwood, there are beautiful buildings all over the south side in complete and utter ruins.
I’m pretty sure that this home is a survivor of the race riots that decimated the West Side even worse than the South Side. I’d bet that house is in North Lawndale - up until the 1940s it was a wealthy jewish enclave (mostly Russian and Eastern European). Redlining forced the poorest blacks into the neighborhood (served two different racist goals). MLK moved into North Lawndale during the civil rights movement, and when he was assassinated North Lawndale was ground zero for the riots in Chicago. That photo is pretty representative of what that area looked like afterwards. However, that neighborhood has a lot of gorgeous old homes that survive to this day, but are in need of a lot of TLC.
If I could afford some of those gorgeous houses, I would move back to Chicago in a New York minute.
Didn’t “Chuckie” visit that house?
I’m surprised there are so many REOs in that area. I tend to think of it as pretty stable, with a large percentage of long-time homeownership.
Two demographics I wonder about are A.) adult children who decided not to sell a family property, then took out equity during the boom; and B.) newer Eastern European immigrants involved in construction and development who bet on the market always going up and are now feeling the pinch.
(For those not from Chicago, local construction crews are filled with Romanians, Poles, Ukrainians, and Russians in addition to Latinos. Many of the Eastern Europeans are highly skilled and run their own small businesses.)
Those are two good points.
Home was near Portage Park, about the mid-1990s we started seeing some of the neighborhood ne’er do wells inheriting their parent’s house - usually after never having moved out in the first place. That is indeed an N.W.S. phenomenon.
Later in 2001, I sold a place in Norwood Park to a Bulgarian. After 9/11, and I am not kidding here, Eastern Europeans put RE acquisition on the northwest side into overdrive. The rumor was that many thought another “incident” would send all the lakefront high rise folks scurrying to the city limits. No kidding.
Wow. Talk about paranoia running amok.
I’ve met quite a few Chicago natives who inherited a bungalow or two-flat from their parents or grandparents. Some played it smart, some didn’t (Shrug.)
There are some nice homes in Portage Park. I’ve been watching the prices out that way on bungalows — they seem to be dropping, slowly. A way to go yet.
newer Eastern European immigrants involved in construction and development ??
Exactly….The speculation and easy money given to wanbee’s in land development has been every bit as bad as the big builders and flippers producing and purchasing single family homes…There is entitled land “Everwhere” you look both large and small with prices 3 X of what it should be…
Great point about skilled Eastern European labor. These folks can even do real plastering.
Chicago has partied just as hard as most of the East Coast (though people there are in extreme denial.)
They have pretty much plastered over Ravenswood, Lincoln Square, and Andersonville, and the rest of the North Side with condos.
Don’t get me started on the South Loop east of Chinatown either.
There were freakin’ condos going up on South Pulaski near Midway.
Condo conversions in Lakeview. Teardowns, and brand new structures put in place. Podunk little structures. Three hard Chicago winters, and there will be no need of JT’s for the owners.
Condos, condos, condos. Everywhere.
Three hard Chicago winters… I always assumed that. Most of the West can get away with studs, Tyvek and a good roof. Strikes me that the heavy construction models of the Midwest (brick and stone) had a reason. And it comes each and every year.
Any place that has a temperature range of 200F (between extreme summer and extreme winter) like Chicago does needs solid construction.
I am willing to believe that there may be “better” modern ideas out there but Tyvek and plywood, and leaky edges isn’t one of them.
Really 200F? I’m trying to think how this could be. I know Cgo might get up to +120F in summer, but that implies -80F for winter, which is more like Antarctica or Mars than Chicago. ??? Maybe you’re counting windchill?
Sorry, more like +110F to -30F = 140F range.
Pre-coffee post, brain fa*t.
It’s not just the variations in temperature - you have to consider the speed at which temperatures can change. Case in point:
Today, the temperature in Chicago is expected to drop 50 degrees F in about 12 hours. And of course yesterday it warmed up so much all the snow melted. Can you say potholes?
Which brings me to my favorite Chicago joke:
Q: What do you do if you don’t like the weather in Chicago?
A: Wait for an hour. It’ll change.
Though not life-threatening as a Chicago winter would be, its water intrusion, ironically, that plagues crappy SoCal construction. On a hot, sunny day, builders forget about the importance of window and roof flashing. It may be mostly arid here, but when it does rain, it pours.
“There were freakin’ condos going up on South Pulaski near Midway.”
It is so funny you should mention those! My girlfriend grew up near there in the 70s and we were joking about them the other weekend. Bad news! Every bit as bad as what we here from the IE - only colder.
I lived in Chicago for a very long time.
It was not that long ago that stopping for gas in some of those neighborhoods was “sketchy” (not dangerous just had to be careful.)
Now?
$300-500K condos?!? I don’t think so.
The condo situation is indeed ridiculous. That’s where Chicago proper is going to feel the pain.
While sales are definitely soft in Chicago, units already in the pipeline are still going up. Right now, I can see several cranes from my office window in River North. In the neighborhoods where I live, eat and booze, there still seems to be a trickle of buyers … even in January.
“The condo situation is indeed ridiculous. That’s where Chicago proper is going to feel the pain.”
If they get the Olympics, the dollar crashes, and the condo market does too, perhaps people will buy them just for use during the games, then abandon them.
Any more “if”s in that statement and you should start putting on the Lereah/Yun dunce cap yourself!
Just spent a few days with old friend who lives in Andersonville/foster-Clark now…and as we were walking the dog, I kept noticing for sale signs… yes they were up for a year, but friend says there is no problem in their area, as her home was (ex is bum -story would make a tv movie)foreclosed and Agent flipped it for over 1m. LONG story, but to her eyes, the RE mkt in that area, 3 bloks from lake is still hot.
I dunnoooooooo. I speculate it is here, but no one is owning up to it. Yet.
This is the same Chicago where as a landlord you will be hard pressed to find a nice renter who can regularly pay $1500.
Spare me the starry-eyed stories of how A-ville/Foster/Clark is different and how the yupsters/gupsters/lesbian moms will make prices keep rising forever.
Keep on dreamin’.
The area around the Bryn Mawr ‘el stop was heavily “tagged” (spray painted) these past two nights with what looks to be anti-gentrification grafitti. This is just across Broadway from the homes you mention. First time I saw that much tagging in the area in five years - odd.
Excuse me? This is new now?!?
The section along the Red Line close to the lake was always sketchy.
Your comment says it all. First time, you saw it in the five years. Expand your horizon to fifteen, and you’ll be surprised that there was ever a time where there was no tagging.
Yes, but fifteen years ago the houses across Broadway weren’t selling for near a Mil. This illustrates the fragility of the situation - something for folks to consider when dropping hundreds upon hundreds of thousands of dollars.
Faster Pussycat, I think his point was that it was anti-gentrification graffiti, not just another-boring-day-in-Chicago grafitti.
Right, and 15 years ago, they weren’t handing out pay-option neg-am loans like M&M candies either!
Those houses are not worth a million. Emphatically so. They would never “cash flow”.
When you have a city where finding a renter who can regularly fork out a $1500 check that won’t bounce is akin to a mercy visitation from the sweet lawd baby Jeebus, forking out a cool million in a sketchy neighborhood is asking for… (well, you can finish that metaphor yourself!)
Don’t get me started on the South Loop east of Chinatown either.
Don’t get me started, either. A complete yuppie ghetto.
Don’t forget all the new condos in the suburbs. Lots of them out here in the western suburbs - Wheaton, Glen Ellyn, Naperville, West Chicago ….
Driving up i-95 was a surreal experience. There was condo structures literally adjoining the freeway. Ads for condos everywhere.
There was even a building in the west loop abandoned in the last bust now selling for, you guessed it, $300-500K “and upwards”.
Wheaton? Forget Wheaton. They have plastered freakin’ Buttfu*k Batavia with condos.
Everyone wants to live in Batavia. No, even I can’t say that with a straight face.
We’re renting in this area as a suburban experiment. Many of the for sale signs were taken down over the winter, but I am starting to see a few pop back up. Like most places there is a big gap between median family income and median home price. We probably make 2.5-3x the average for out here and I would think twice before buying the current place we are renting.
Am seeing the same thing here in Tucson. Also seeing longtime “for sale” properties turning into “for rent” properties. Good luck with that one…
As I am in the East Bay,CA. The thing is that I’m starting to see what seems like a lot of nice houses go up on the market. You just get the feeling that there are a lot of homeowners who realize that they’ve totally blown it and should have put them up two years ago. Why now is beyond me because most of these people seem to be very well off.
..”seem to be”… love it.
http://chicagobusiness.com/cgi-bin/news.pl?id=27940
Illinois foreclosure activity jumps
(Crain’s) — The number of foreclosure filings in Illinois nearly doubled last year from two years ago.
There were almost 90,800 foreclosure filings in Illinois in 2007, according to figures released Tuesday by RealtyTrac of Irvine, Calif. The filings were made on 64,310 properties.
RealtyTrac defines foreclosure filings as default notices, notices of auction sales and bank repossessions.
The number of filings in Illinois marks an increase of 25.3% from last year and a 94.3% increase from 2005.
I posted this yesterday but most people don’t read back. Here is the post again. it’s very good
It’s in our best interest to let all those FB’s walk away. They can’t or won’t reduce the price enough. Those who bought before the bubble are too often greedy and will chase the market down. Damn them, I don’t feel sorry because they will spare some knife catcher from becomming a FB and parting with his hard earned money. Let the seller be denied “bogus” equity that was never legitly his to begin with.
I wish my parents sold their house, but then whoever bought it would be screwed. They saved someone’s finances at the expense of their own. That’s half a million going bye bye as the bogus equity evaporates away.
No, it’s really not difficult at all to sell a “regular” house (distinguished from an bank-owned house how, exactly? ). What’s difficult is for a hallucinogenic seller to accept reality of the market price.
True, but then not true. The necessary deep-pockets of a bank and their cold calculations of moving product at any cost can kill the sale hopes of an individual seller. The market price of REO’s will always set the bottom, and the next bottom and so on. These liquidations will go on til they’re over - say 2011/2012?
“These liquidations will go on til they’re over - say 2011/2012?”
No way this foreclosure/REO thing ends less than 20 years from now. It could even be permanent, based on tighter lending standards, lower employment and less illegal population.
Good point. It’ll go on til the repos are so effed up that it’d be more cost effective to build a new house, that’s if a new house is even needed. The real problem is, at some point someone is going to have to dig up all the concrete in the basements 50 years from now if they want an open area again.
At least the wild west ghost town didn’t have friggin’ cement basements, when the place when up in flames or rotted away you’re back to square one courtesy of nature. Nature will take 1,000 years to clean up this effing mess.
What’s not regular about the repo house, does it only have two walls or something?
Actually, they’re both regular house, one is just ridiculoulsy overpriced. Actually, probably both of them are, just one of the regular houses has a lower price than the other.
“Some went to first-time homebuyers such as Marie and Timothy Philippi. They successfully bid on a three-bedroom, three-bath unit with a view of the St. Paul skyline. Philippi said she didn’t want to disclose the price, but said they got it for ’substantially lower’ than its original $266,000 price tag.”
“‘I think it was an awesome deal,’ she said. ‘It’s still in the Sheetrock phase, so we get to pick out colors and cabinets and everything.’”
I believe I would have waited until this baby was in the “post-sheetrock” phase. Picking out colors and cabinets may become difficult if the builder goes BK before they exist.
..
And you can bet, now that the place is sold, money-grubbing contractors will cheapen the construction ( labor, materials ) the most they can in order to maximize profits.
..
Schiller says Boston down 3.6%. I hate to disagree with Mr Schiller but …
Realtor sent me 10 listings. Massachusetts North Shore. Note Boxford is an affluent town. The 3 Boxford entries below have between 2 and 3 acres. For the most part these are very nice properties. Some pretty decent haircuts!
Boxford
9/07 552K
1/08 450K
Beverly
7/07 469K
1/08 379K
Danvers
6/06 590K
1/08 499K
Boxford
5/06 555K
1/08 480K
Groveland
6/06 520K
1/08 400K
Boxford
5/06 550K
1/08 428K
Agree with you, but the listings in all of those cities have far bigger discounts than the closed deals (espec. from November).
Because nothing is selling, the price declines don’t look that great yet. But the price you pay today and tomorrow will be far less, I believe…
If those are listings, then they have no bearing on Case-Shiller. The index sacrifices timeliness for accuracy. (ie, it will alway be a bit of a lagging indicator since it depends on purchases that have closed.)
“Hard times for homebuilders spelled deals this past weekend at the Minneapolis Convention Center, where local contractors sold 180 of 216 newly built homes they put on the auction block.”
Sometimes it seems like the only people who will sell in the next five years are banks and homebuilders.
Same here. The only people thatll sell homes are those that aren’t so overpriced, such as in NW Pennsylvania where homes sell briskly since they can be had for under $50,000
Sometimes it seems like the only people who will sell in the next five years are banks and homebuilders.
Good post! It sure is starting to look that way in most areas. The secondary market homeowner appears to be stuck thinking prices will always go up and is refusing to adjust their listing price downwards. The standoff between the seller and the buyer continues. The age old question comes into play, Who will win, the buyer with the money or the seller with the over priced home?
The buyer has options now - banks w/REO’s, builders w/standing product, sellers with a sense of reality. Those sellers that refuse to play or can’t play this new game will lose. Reversion to the mean is a real bitch.
“The Chicago metropolitan region ‘isn’t as bad as Florida and California, ground zero in the housing recession, but we have the same problems,’ said economist Diane Swonk.”
Swonk is a long established and certified liar. As indicated by her statement above, her denial extends back to mid 2005 when Lying Larry Kudlow would wheel her out and she’d read her scripted BS and then disappear until the following week. She’s another that ought be doing the perp walk along with Cocaine Larry and Art(ful liar) Laffer.
Is this is the Diane Swonk of Mesirow Financial that was quoted in that top of the bubble 2005 New York Times article?
You know the one who said “I don’t think we even got what it takes to slow down these year over year price increases, let alone stop it”.
Huh. South Dakota only had 24 properties file for foreclosure last year.
That’s because most people can afford the $50k homes in this state. They can always rent it out for more than the mortgage anyway. Same story in NW Pennsylvania. Ill be moving there while waiting for other locations to start having $50k homes. Even north FL used to have decent starter homes for $50k and if this becomes true again, I may move back.
ha! already had enough of the Lake Erie snows?
I haven’t left Florida yet. I am in south FL right now and if I can get a decent house for $50k in north FL, id choose it over NW PA. But this isn’t the case yet, I am not paying $150k when Zillow zestimates it at around $50k in 1998-2000 before the bubble.
Theres better locations but at those very inflated house prices, I am not even considering any other location. If I have to stay in NW Pennsylvania forever, that is fine. If houses go back to fundamentals elsewhere, I may relocate again if those other locations are better.
Many people have left Florida, California and many more are leaving. Some will return when/if house prices return to fundamentals and become affordable again.
Make sure your first purchase in NW PA is an industrial strength snow blower.
methinks Bye FL is pulling our leg
what twentysomething wants to live in Oil City? That’s the kind of town youngsters want to get the H out of.
also Bye FL claims to have his/her own internet business, but doesn’t know how to look up the avg. temp of a place online? too much strangeness in Bye’s posts.
But that’s OK, I’ll play along. I’m going to go check out my seed catalog right now in preparation for planting my apple orchid.
I lived in Boston for two years. Long enough to know that I HATE really cold weather. 35-40 degrees is fine. But -10-20??! Hell no. I made up my mind after giving it a try. Call me whimp, but I hate cold weather. Bye Fl, have you lived anywhere that cold before? If not, it’s a shocker!
Bye Fla is a dreamer and schemer, anyone who intends to grow orchids in Oil City has to be.
phillygal, I would rather live with people a few years older than younger. My mindset is not the same as other 25 year olds. There are plenty of 20 year olds in NW PA, just not as many as other locations. Those who leave NW PA weren’t ready for a house anyway, probably still in college.
I know how to check the weather, thanks. Yes I realize NW PA has it’s occasional cold days, however it’s preferable to many other problems in other locations.
jetson_boy,
Boston isn’t a good place to be in due to crime and ripoff house prices more than due to cold, which by the way is zone 6a. NW PA is zone 5b making it colder than Boston.
I have not lived anywhere that cold, been to Toronto in November when I was little. There are no worthy locations for me to relocate to that arent overpriced or high crime and lack of winters. None of Florida is affordable, even in Tennessee, there isn’t much available for $50k. In Texas, thatll get me a fixer upper house. The house bubble caused this huge mess and it needs a few years to sort itself out. In the meantime, I need a place to live. You live in California? What’s your rent costing?
ROTFL . . . thanks for that phillygal. I too am growing weary of Bye Fla. Dude, get out of your parent’s basement and pull the trigger on that PA house already. We all have seen your story for a couple of weeks now, no need to repeat it ad nauseum. I don’t think you are going to convince anyone here to follow you there either.
Flatlander ,
Who knows, maybe Bye FL has got the jump on all of us. I’ll bet s/he’s got inside info on the town and Oil City is ready to boom again just like it did in 1902.
Bye FL, are we still cool?
Why is everyone so wimpy about winter? I grew up in Orange County, CA…I think the wildfires, crushing humidity, smog and throngs of sweaty people with nothing to do but hang out at the mall is worse than the coldest winter I ever spent in Alaska.
You are being a little too hard on Bye FL. He or she is not in an easy situation — finished with college, un- or under-employed, and living with Mom and Dad.
Under the circumstances, it’s not surprising that he’s making some wild plans.
I think it would definitely be best for him to find a steady job and an apartment (maybe one with roommates if it’s too expensive to rent on one’s own) in South FL before moving to Pittsburgh. Don’t be too hard on him, though, it’s not easy to be a young person these days. You have to wait a long time before opportunities come along and this can be difficult.
This is what we all are waiting for, tons of people STUCK in their homes for trying to sell it.
I’ll bet these people will rent after they sell, and will till all their friends how bad RE is an an investment!
=========================================
Numerous lenders told her the building would have to be delisted for three to 12 months to be considered for a refinance.”
“‘The issue is not a matter of bank policy but one of what criteria investors on the secondary market set forth when agreeing to purchase loans from lenders
Let them tell others what a bad investment real estate is. Once the herd mentality changes, itll be getting time for us fence sitters to buy on the cheap
Sounds very Antebellum. Move out of large estate (McMansion), rent out large estate to cover costs, then find a small (starter) home to rent to live in. Mortgage sharecroppers.
test
You pass with flying colors!
LOL
had tried to post earlier, but nothing seemed to go through– but thanks for the jab
Ben Jones (and Staff?) has to often manually approve messages for them to appear. This is if the anti-spam software flags it. I notice sometimes it takes a while (20+ minutes).
But they almost always show up.
Simple messages like “test” tend not to catch the spam filter, so they immediately post.
Point is, again, your messages almost always show up. Just give it time.
I tried to post for over a year. My posts finally started to go through, but I no longer have anything to say.
Such as THIS post. Alas, the lost opportunity.
that’s why i didn’t double post and waited a couple hours before reposting. Frequent reader, not frequent poster so was just checking to see if i could post at all. Actually been coming here since summer of ‘05
“It’s very difficult to sell a regular house because they’re competing against a bank repo.”
Translation: It’s very difficult for an individual to sell an overpriced house, because the REO’s are often sold with some kind of short-term insurance policy on the utilities and appliances, and the price of the REO’s is a better reflection of what buyers can/will pay.
Looks like some “capitulation” is taking place. Capitulation being the event prior to Blood-On-The Streets. However, it’s only soft capitulation at this point. These auctions, where builders are selling at a loss, are not in areas where the big run up in prices took place. They are just dumping a lot of excess inventory where there was too much over building. So far, prices have not dropped anywhere near the level which indicates capitulation in the major cities of California, New York, etc. So, we ain’t anywhere near Blood-On-The-Streets yet.
I’m not even seeing capitualtion yet in W. Colorado. Everything’s just sitting, and the used house salespeople overprice anything new on the market. Hardly any reductons, though some. I’ll be dead from frustration before I can afford a house at this rate. My new moniker will be Sickofrenting.
Why not just relocate if you are sick of renting? You can always relocate again when prices bottom out there or anywhere else.
It’s hard to relocate petroglyghs…
LOL! Though a few have been relocated with the delicate use of hand chisels - relocated to Japanese collectors, is my guess.
Chicago Bubble Blog links to the following blog:
http://cribchatter.com
I hope I don’t offend him by cribbing from his blog, but it is a great site for those interested in what is happening in the Chicago condo market. It’s a lot worse than the Tribune would ever report.
The last bit about the difference between staging and not staging properties was interesting. I vote for staging- yes, same place… but the difference is like a lady with or without her “face” on.
Crib Chatter is an OUTSTANDING site for those thinking of buying in the city. Sabrina, the woman who runs it, does a great job doing her research on properties.
Thanks for the link, yo.
Yo? Don’t ever say yo when refer to Chicago real estate. You’ll be linked to the local RE pimp.
The Chicago market is certainly interesting right now as many of the comments here attest.
They are still building a dozen or more high rise condo buildings in the South Loop.
Streeterville will supposedly soon have two of the tallest buildings in the nation in its midst (The Spire and the Waldorf Astoria hotel/condo) if they both get built. Both will be over 100 stories.
These are crazy times.
Foreclosures are crushing the South Side. They aren’t as prevalent on the north side - yet. This is the year we’ll see a lot of stress amongst north side owners.
Already, I know of several 20-something couples who want to move out of their Andersonville condos to buy a house in the suburbs and their real estate agents have told them they couldn’t even come close to breaking even on their condos.
They are astonished.
Imagine that?
It’s going to be a rude awakening for a lot of young people who are going to be “trapped”- so to speak- in condos and lofts for many years.
“‘This is the first housing downturn that is self-inflicted, although exacerbated by financial institutions offering exotic housing loans,’ said Tracy Cross, president of a Schaumburg-based research and consulting firm.”
Ha!
Way back in 1933, The University of Chicago Press published a book by Homer Hoyt called “One Hundred Years of Land Values in Chicago.” He found 5 major booms and busts, and his research discovered a common progression in all of them:
1. Machine techniques, production methods improved
2. Population begins to spurt up
3. Shortage of housing, office & commercial space first felt
4. Rents begin to rise.
5. Selling prices of old buildings begin to advance
6. Vacant lot purchases begin to rise
7. Rate of new construction begins to rise sharply
8. Credit eases to stimulate volume of new building
9. Rapid growth of population projected far into the future
10. Prices of tracts near settled areas advance rapidly to peak.
11. Large tracts subdivided beyond needs of immediate development
12. Lavish public expenditures
13. Rate of population growth falls off
14. Vacancies reappear
15. Rise in rents slackens
16. Volume of building construction at peak.
17. Asking prices of land advance in face of fewer land sales
18. Financial institutions continue loans on peak values in face of lessened construction
19. Holders of 2nd mortgages begin to foreclose with faith in 1st mortgages
20. Stock market crash
21. Unemployment mounts to peak; wages down
22. Increased movement of population to small city or farm; doubling up in city
23. Vacancies mount to peak in houses, apartments, offices, stores; industrial rents down
24. Interest charges high in proportion to net rents
25. Taxes high in proportion to net rents
26. Second mortgage holders wiped out in flood of first mortgage foreclosures
27. Bank failures mount; loaded with real-estate “frozen assets.”
28. Volume of new building at bottom
29. Subdividing stopped; most vacant land not salable at any price
30. Construction costs at lowest point
It will be interesting to see how close this boom/bust will track with Hoyt’s findings from 75 years ago.
It would seem like most of those steps occur automatically, with the exception of 8. Why do those who control 8 pick that particular time to juice things…is that where it suddenly looks profitable to loan money again?
So it looks like we’re somewhere around 19 or 19.5 today? Seems like 20-30 kind of blur together…I see some of that already.
great find, Brian
Awesome find. Gonna track this one down.
Interesting, same dynamics as an ocean wave…
The book is out of print (of course), but it is also in the public domain. I downloaded a copy of the text off the internet a few years ago.
Here’s a download link:
WARNING: large PDF
http://www.archive.org/download/onehundredyearso00hoytrich/onehundredyearso00hoytrich.pdf
Concretely a 61 MB pdf file. This took a while.
Speaking of the Midwest, has this been posted here before?
http://www.breitbart.com/article.php?id=080127183107.ahcwfxrz&show_article=1
Shaker Heigts was once one of the most prestigious towns in Ohio.
“The streets are empty. Trash rustles down the road past rusted barbecues, abandoned furniture, sagging homes and gardens turned to weed. This is Shaker Heights, a suburb of Cleveland and a town ravaged by the subprime mortgage crisis roiling the United States. Faded “for sale” signs sit in front of deserted houses. The residents are gone, either in search of new jobs after the factories shut down, or in shame after being evicted for missing their mortgage payments. A red, white and blue American flag flies over windows and doors which have been boarded up to keep the drug dealers away. Thieves have stripped many homes of the plumbing, the doors, the windows, the aluminum siding. The police station parking lot is full. The officers, who have seen their numbers triple since 2006, are coming back from their rounds. They speak of installing alarms in some of the homes claimed by squatters.”
On the other hand, commentors on the article say that couldn’t be Shaker Heights. They must be talking about the nearbly City of Cleveland. Any opinions? The picture looks like it could be part of Shaker Heights.
Shaker Heights sits alongside the eastern border of Cleveland; would be hard to tell the border if it were not marked and streets blocked off with barriers ( to control traffic). A formerly tony area called “Shaker Square” is actually in Cleveland. Was once the most desirable part of Cleveland ( kids went to Shaker schools). Shaker Heights remains the purvey of the well off, but, is now fuel for the smoke on the horizon.
There are still decent areas in Greater Cleveland, as in almost any large metro area in this country, to be able to live safely and raise a family. For all the crabbing I hear, the climate here abouts isn’t that bad….47 degrees today, shoveled snow only once so far this season, Lake Erie wont freeze this year, no drought. Now if we could only get some of those high class California and Colorado jobs here……
The really frightening thing about the Shaker article is that it shows that the lowest priced homes in the city are the ones being affected. The progressive chain of home ownership has been essentially destroyed. There is now no way to get equity out of these homes to purchase the next link up. Watch for more articles like this, only the names will change.
Former Cleveland resident here (thank the gods I left). Chagrin Blvd could be considered one of the boundaries of Shaker Heights. It’s a bit south of the area proper, but only by a block or two. Parts of Shaker are extremely nice. Old huge, tudor style homes that were built 80-100 years ago on tree-lined streets. Parts, especially those that border upon Warrensville Heights (which Chagrin road is very close to) isn’t all that great. So, journalist may have taken some liberties, but nearly as many as the commentators are implying. I’ve heard from freinds who are still in the area that other “nice” areas in Cleveland are getting hit as well, like Beachwood & Pepper Pike. Not as bad as Shaker, but the worm has definitely turned in the last 2 years.
In American Siberia, American Dreams are now nightmares…
Cold cash is nowhere to be seen.
The story you linked to is total crap.
“‘Unfortunately, about half of the people having problems with subprime mortgage loans could have qualified for prime loans,’ she said. ‘This reflects greed all around.’”
No! It reflects greed on the lender. For the borrower, it’s an indication of INCREDIBLE STUPIDITY
Here’s a short sale in Wheaton (western suburbs)
1712 N Wasington
sold for 1.1 million in 11/2005
now for sale for 749,900
http://everymlsnumber.com/WHEATON/06713255.htm
http://tinyurl.com/ywansd
I’ve noticed a few properties sell or be listed below the previous sales price, but the vast majority of the listings still have wishing prices and most are sitting.
Just spoke to my friend in Chicago. He “owns” 3 condos and rents two of them. One tenant is an online poker player. Until this month he was still positive about the Chicago market (both real estate and labor markets). Today he said ” the economy is really bad here.” To me that’s the nail in the Chicago real estate coffin. Layoffs occurring at Sears, Chicago Tribune and Motorola.
“Layoffs occurring at Sears, Chicago Tribune and Motorola.”
…Chicago Sun Times, USG, Tellabs…
…BP